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Press Room: Tax Release

Maryland Residents May Be Due Refunds for Taxes Paid to Other States

A recent Maryland Court of Appeals decision opens the door for Maryland residents to file claims for refunds on additional taxes paid to other states.

Maryland imposes both a state and a county income tax on a resident’s income. Like many other states, Maryland allows a credit for income taxes paid to non-resident states. However, the Maryland Comptroller applies this credit for taxes paid to those states only to the state portion of the income tax liability and not to the county tax.

The Maryland Court of Appeals recently upheld a Circuit Court decision and denied the Maryland Comptroller’s motion for reconsideration for its decision in Wynne v. Maryland Comptroller (January 28, 2013). The court ruled that the section of the Maryland tax code allowing a credit against the state-only portion of the tax discriminated against interstate commerce and violated the Commerce Clause of the U.S. Constitution. Therefore, the credit for taxes paid to other states must include the local tax in addition to the state portion of the tax.

However, the Court of Appeals has issued a stay of the mandate pending a timely petition for the Maryland Comptroller to file for a writ of certiorari with the U.S. Supreme Court. It is unlikely that this matter will be resolved definitively before extended returns are due on October 15, 2013.

The decision in Wynne creates an opportunity for taxpayers to file protective claims for refunds for all years open under the statute of limitations where non-resident taxes exceeded Maryland state tax. The statute of limitations for refund claims for 2009 extended income tax returns expires October 15, 2013. Taxpayers should review their Maryland income tax returns and, if applicable, file protective claims for refund for all years open under the statute of limitations pursuant to the Wynne decision.